January 29, 2006, Press Trust of India (PTI)

Procurement of foodgrains for distribution to the poor through the Public Distribution System should be separated from the price support to farmers done through the Minimum Support Price (MSP) mechanism, said a civil society group.

Instead, this should be done through competitive bidding for delivery at target locations to minimise procurement cost of foodgrains,” CUTS International said in a statement.

“There are distortions and inefficiency in the way food subsidies are delivered, leading to mounting subsidy bills, without commensurate benefits to target beneficiaries,” CUTS Secretary General Pradeep Mehta, said.

He also highlighted that while food subsidy bill has gone up by 10.5 times to Rs 25,800 crores in 2003-04 from Rs 2,450 crores in 1990-91, only 25 per cent of the grains actually reach the poor.

He also said the government should take measures to separate the MSP-PDS operations.

Favouring decentralising of the procurement process, he said, states should be encouraged to create buffer stocks to ensure price stability.

The organisation has also suggested transferring of cash through post office network in order to minimise leakage of foodgrains and provide direct cash support to needy families to cover the subsidy differential.

Pointing out that at present the cost of transferring a rupee to the poor through PDS is Rs 6.68 as administrative cost account for 85 per cent of the total expenditure, CUTS said this entailed a huge gap between the purchase price and issue price.